90% mortgage - where to apply first??

FluffyClouds

Hello

I am ready to apply for my first mortgage. I have a 10% deposit and a good credit history. I earn an annual salary of £34549. I have 1 loan with Halifax which I have about £10,000 left on and a car finance agreement with about £5000 left on. Both accounts are all up to date with on time payments throughout. My monthly payments for these credit accounts are £428. When using the affordability calculators on both Post Office and Halifax with these figures they both say I could borrow up to £125,000. I am looking to borrow £112,500.

My question is this:

Should I apply for a mortgage with Post Office as their rate on 90% mortgages is better and they are offering 5 yr fixed at 5.49%?

Or

Should I apply with Halifax whom I bank with and have all my savings with who are probably more likely to accept me as I have a good history with them as well as a good credit history but their rate is not as good at 6.29% and are only offering a 2 yr fixed rate?

My concern is that if I try Post Office they might be more likely to decline my application due to the loan and car finance - I have read somewhere on here that they will not accpet you if your total outstanding debt balance is more than 50% of annual salary.....but not sure if this is worked out on gross or net salary. If its gross would not be a problem but if it is net it might be.

I am then worried that if I got a decline from Post Office I will incur a credit search which could reduce my chances with Halifax?

Any advice would be appreciated.

marathonic

Where are you based? A lot of building societies have better 5 year fixed rates for properties in the local county. Also, First Direct are 4.99% for a 5-year fixed, fee-free 90% LTV mortgage.

Actually getting approved is the problem.

marathonic

Also, looking at your figures, it looks like you want to buy at £125k.

Is it personal circumstances forcing you to buy or just a desire to own your property? If you don't need to buy right away, why not save another £6,250 whilst paying down your current loans. You'll be FAR more likely to be accepted then (I don't fancy your chances currently but you could be lucky).

At the end of the day, banks have A LOT of applications for 90% mortgages, have a certain target amount of money that they're planning to lend at this LTV and are only going to pick the best of the applications. It would be reasonable to assume that they'll have enough applications from people on your salary with NO credit commitments to lend enough to meet their targets.

The APR on an 85% mortgage for a 5-year fix appears to be 0.7% or so lower which, on your loan, is more than £60 per month in savings.

FluffyClouds

It is really a desire to own my own property. I am 35 yrs old and still living at hoe with parents!!! I desperately want to get on the property ladder so would like to try and buy as soon as I can really. However, if I am not successful I will just have to wait and save a bit more as you suggest. I just don't want to apply to more than a couple of lenders and risk damaging my credit rating.

marathonic

FluffyClouds wrote: »

It is really a desire to own my own property. I am 35 yrs old and still living at hoe with parents!!! I desperately want to get on the property ladder so would like to try and buy as soon as I can really. However, if I am not successful I will just have to wait and save a bit more as you suggest. I just don't want to apply to more than a couple of lenders and risk damaging my credit rating.

I suppose you could chance a 90% mortgage with one of the lenders and, if unsuccessful, continue to save for another year.

Someone more familiar with credit reports should be able to confirm this but, as far as I'm aware, defaults stay on your report for 6-years but a credit search by a bank only stays on it for 1 year.

ACG

With that debt in the background i dont think first direct would look at you.

There are a few other 90% deals on the market - a couple with better rates than both of those you have found.

Look at this from another way - you have a £12k deposit (approx?) and £15k worth of loans/HP.

My experience of the post office is that theyre not the most lenient, but ive only submitted one application with them about a year ago.

If you prepared to do the research you will find quite a few better deals, if not i would suggest you speak to an Independent Mortgage/Financial Advisor. They will also be able to give you an idea as to whether or not you will be accepted by a lender with the loans in the background.

FluffyClouds

I understand that there are better rates out there but I suppose I would rather play it safe....maybe Halifax would be my better option? If I am unsuccessful do you think I would be better off saving more deposit and reapplying when I have 15% or would I be better off paying more of my loan off and going back again with 10% deposit?

marathonic

FluffyClouds wrote: »

I understand that there are better rates out there but I suppose I would rather play it safe....maybe Halifax would be my better option? If I am unsuccessful do you think I would be better off saving more deposit and reapplying when I have 15% or would I be better off paying more of my loan off and going back again with 10% deposit?

The mortgage market seems to be constantly changing these days - there's no point deciding now what you're going to do regarding mortgage applications in 6-9 months time.

It looks like you've three years left on your loans. Do any of them have early repayment charges or allow overpayments?

Basically, if it were me, I'd apply for a 90% mortgage and, if unsuccessful, I know I need to either save another 5% deposit or lower my credit commitments.

I'd use half of my current 10% deposit to pay off loans (choose the one at the highest interest rate if both allow overpayments). That way, I still have to save 5% but I'll save it much quicker due to my loan commitments being reduced. I'll also save a fortune on interest payments.

In doing this, chances are you'll be applying for a 90% mortgage next year - but with no credit commitments.

FluffyClouds

Thanks! That is really helpful. That is what I will do :-)

Dave_Ham

Sorry, late on after you have already had some opinion. My thoughts are slightly different.

Firstly, you will absolutely sail through the Halifax at 90% (from the information provided) Subject to this being factual, I would almost personally guarantee this.

Post Office calculator is a bit misleading as it quite often throws up figures that do not transpire into offered amounts. Given your circumstances I would say you have a chance, but not necessarily a good one. If you were declined, this would not hamper your Halifax application unless you were applying for multiple unsecured credit at the same time.

I do not think it is a good call as a first time buyer to take on a 5 year fixed at 90% - personal opinion.

You could have loads going on within the next 5 years and therefore do you really want to be tied in for 5 years?

Factor in potential of paying mortgage down and increase in house value, you may get a better deal at the end of the 2 years..!

Do not use the Estate Agent broker - please..

I wish you well....

squeeks

Dave_Ham wrote: »

Factor in potential of paying mortgage down and increase in house value, you may get a better deal at the end of the 2 years..!

You probably want to be factoring in housing price drops and interest rate increases in the short term. It would be high risk to rely on an increase in value over the next 2 years and for interest rates to stay this low in my opinion.